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How self-validating can be harmful to naive entrepreneurs

By David SchwartzPublished: February 26th, 2014

In his recent blog post, start-up consultant Roger Cauvin describes how a typical entrepreneur might go about validating his or her company – and why it’s usually the wrong approach.

“The assumption,” he writes, “is that you have a great product idea and seek validation from customers before expending vast resources to build and bring it to market.” The key, however, is how thoroughly you seek validation, and what methods you use to go about it.

Here are a few methods typically used, which Cauvin asserts are not adequate and can lead to a false sense of security:

Present the idea. The entrepreneur shows a slide deck, minimum viable product, or demo to one or more prospects. When the feedback comes back positive — no matter how broad or non-descript — the entrepreneur “feels warm inside” and considers the idea validated.

Ask about the “pain point.” That is, potential customers are asked about whatever problem a product or idea is attempting to solve. If a handful of potential customers tell the entrepreneur that they have experienced this same problem, the entrepreneur feels validated and, as Cauvin puts it, “does an internal high-five.”

Name a price. Potential customers tell the entrepreneur how much they would be willing to pay, and the entrepreneur settles with this without considering whether customers would commit to paying this price when faced with the real product.

So what’s wrong with this typical approach? According to Cauvin, the problem is that validation often doesn’t reveal what you really need to know, and the concept of validation instead should be scrapped. Instead, he says, “make falsifiable predictions “with the intention of testing, not “validating” the hypotheses and underlying assumptions.”

For instance, rather than asking potential customers what they would do, entrepreneurs should ask what they actually do and have done in the past, as well as whether the supposed “pain points” manifested themselves in those past experiences. When it comes to pricing, entrepreneurs should quantify the costs that the targeted problems impose on potential customers, and price the solution accordingly.

“The possibilities are endless,” Cauvin says, “but they require a mindset that emphasizes falsifying product ideas and business model hypotheses, not ‘validating’ them.”